Front Arena for Credit Derivatives
In the past, many firms have relied on in-house spreadsheets to support basic credit derivatives, structured securities investment and trading. With the intense market volatility of tightening spreads and locking credit markets, relying on spreadsheets is an option that not only introduces inefficiencies to the investment lifecycle, but can also introduce operational risk through credit exposure. Front Arena's comprehensive credit derivative solution helps remove operational risk and offers a comprehensive infrastructure for all credit trading needs.
Front Arena offers front-to-back infrastructure for pricing, deal capturing, risk management and processing across the entire credit lifecycle on a single, integrated platform. Utilizing a single platform allows firms to cut operating costs with a reduction in the number of systems required to support their business and decrease the operational risk involved with operating multiple disparate systems to compose credit investment strategy. Additionally, because Front Arena offers powerful, easy-to-use tools for customization and extension, firms can further increase efficiency and enhance performance with the option to capitalize on arbitrage opportunities between equity, fixed income and credit markets.
Features
- Provides consistent and accurate pricing across all asset classes using default probabilities, correlations and recovery rates
- Supports different pricing models such as the arbitrage-free spread approach and intensity-based hazard rate models
- Identifies net issuer risk across instruments on a country, counterparty and issuer basis and sets limits to these levels based on credit spread delta exposures
- Quantifies and accurately reports volatility exposure and risk through flexible reporting tools
- Manages credit spreads by issuer and asset swap spreads, default probabilities and other attributes
- Creates one single mark-to-market process across all books
- Integrates market and credit risk management allowing calculation of sensitivities and generation of hedge suggestions
- Offers straight-through processing from pre-deal capture and pricing to deal capture/position management and payment processing, confirmation generation and posting to the general ledger
Benefits
- Helps enable users to price and manage any cash-flow-based credit product using Front Arena's flexible, hazard rate pricing engine
- Provides broad product coverage across all asset classes allows the possibility to capitalize on arbitrage opportunities between equity, fixed income and credit markets
- Helps ensure consistent pricing, immediate access to credit deltas, credit risk measurement and reporting
- Speeds up the decision process with real-time risk management and the ability to drill-down through positions to individual trades grouping by sector, issuer, currency rating, country or reference security
- Encompasses full limit management capability across market, credit and liquidity management metrics, including real-time limit alerts
- Supplies real-time updates of position views and risk figures
- Accommodates new and external pricing models via the Arena Extension Framework, allowing for quick changes in investment strategy
- Presents user with a wealth of insight with portfolio analytics, including duration, Greeks and P&L as well as comprehensive scenario analysis, what-if analysis, value at risk, P&L attribution